Many people are hoping mortgage rates will cool down, just like the economy has been. But that may not be the case currently. In this article, I’ll share an Indi Mortgage update about what’s currently happening in the market and what that means for you.
The economy has added 8,200 jobs, Statistics Canada announced during the December Force Survey. Here’s what that means:
December showed that the labour market was losing steam. The Bank of Canada said that its policy rate is right for current conditions.
Even though the economy keeps softening, here are some reasons why fixed rates may not follow suit.
Fixed rates follow Government of Canada bond yields, which track closely with U.S. Treasury yields (about 90% correlation). And something unusual is happening south of the border. Despite the U.S. Federal Reserve cutting its policy rate by 1.75%, the U.S. 10-year Treasury yield has actually risen by about 0.50%.
Historically, those cuts would have pushed yields down by around 0.40%. Bond investors worry that rate cuts plus deficit spending will reignite inflation.
The policy rate is now at 2.25%, which sits at the bottom of the range the Bank considers “neutral” (where rates neither stimulate nor slow the economy, currently 2.25% to 3.25%). That doesn’t leave much room to cut further, even if things soften.
The CUSMA trade agreement is up for joint review by June 2026. How it plays out could shift the outlook either way. Until there’s more clarity, expect continued volatility rather than a clear trend.
For now, the signals point toward steady or slightly higher fixed rates rather than the drop many are expecting.
With all that to be said, you’re probably wondering what it means for you and your unique situation.
If you’re in a variable-rate mortgage or have a HELOC, your rate is tied to the Prime Rate (currently 4.45% as of January 15, 2026). Since the Bank is expected to remain the same, your payments should remain stable as well.
If your fixed mortgage is up for renewal, the usual assumption that rates will be lower later may not hold true. Fixed rates are near their long-term averages right now, and the spread between 3-year and 5-year terms is minimal.
Currently, variable rates are priced below fixed rates. If you’re comfortable with movement within payments, a variable mortgage could be an option for you. With 1.15 million Canadian mortgages renewing in 2026 alone, knowing what’s available now gives you more options.
On January 28, 2026, the Bank of Canada will announce its next interest rate. If your mortgage renews or you’re looking to purchase in 2026 or 2027, waiting for rates to drop may not play out the way you expect.
Your best course of action is to reach out to me today to discuss your situation and options. Give me a call at 250-826-3111, apply on my website or contact me through my online contact form to start the process today.
Let’s get your application off the ground.
